Correlation Between BRIT AMER and Yokohama Rubber
Can any of the company-specific risk be diversified away by investing in both BRIT AMER and Yokohama Rubber at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BRIT AMER and Yokohama Rubber into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRIT AMER TOBACCO and The Yokohama Rubber, you can compare the effects of market volatilities on BRIT AMER and Yokohama Rubber and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BRIT AMER with a short position of Yokohama Rubber. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and Yokohama Rubber.
Diversification Opportunities for BRIT AMER and Yokohama Rubber
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BRIT and Yokohama is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and The Yokohama Rubber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yokohama Rubber and BRIT AMER is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BRIT AMER TOBACCO are associated (or correlated) with Yokohama Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yokohama Rubber has no effect on the direction of BRIT AMER i.e., BRIT AMER and Yokohama Rubber go up and down completely randomly.
Pair Corralation between BRIT AMER and Yokohama Rubber
Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 0.57 times more return on investment than Yokohama Rubber. However, BRIT AMER TOBACCO is 1.74 times less risky than Yokohama Rubber. It trades about 0.1 of its potential returns per unit of risk. The Yokohama Rubber is currently generating about 0.04 per unit of risk. If you would invest 2,516 in BRIT AMER TOBACCO on September 21, 2024 and sell it today you would earn a total of 966.00 from holding BRIT AMER TOBACCO or generate 38.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRIT AMER TOBACCO vs. The Yokohama Rubber
Performance |
| Timeline |
| BRIT AMER TOBACCO |
| Yokohama Rubber |
BRIT AMER and Yokohama Rubber Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRIT AMER and Yokohama Rubber
The main advantage of trading using opposite BRIT AMER and Yokohama Rubber positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER position performs unexpectedly, Yokohama Rubber can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Yokohama Rubber will offset losses from the drop in Yokohama Rubber's long position.The idea behind BRIT AMER TOBACCO and The Yokohama Rubber pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Yokohama Rubber vs. Warner Music Group | Yokohama Rubber vs. JAPAN TOBACCO UNSPADR12 | Yokohama Rubber vs. Chesapeake Utilities | Yokohama Rubber vs. AIR LIQUIDE ADR |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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